11 Undervalued Dividend Aristocrats To Buy Now

In this article, we discuss 11 undervalued dividend aristocrats to buy now.

After engaging in tight monetary policies in 2022, central banks are expected to “pivot and signal cutting interest rates sometime” in 2023, according to a report by JPMorgan. However, the report presented a skeptical view on global growth due to the re-emergence of Covid in China and the ongoing natural gas crisis in Europe. In the current market situation, investors expect defensive value stocks to hold the reins this year as recession fears will continue to haunt the stock market.

Over the years, high-quality growth stocks outperformed value equities. However, with the tech sell-off last year, value investing gained traction among investors. In Bloomberg’s MLIV Pulse survey conducted in the first week of January 2023, 54% of respondents mentioned that they are inclined to invest more in value stocks this year, up from 39% three months ago. Another survey by CNBC revealed that 72% of the participants will prefer value over growth this year. Last year’s returns also showed the dominance of value stocks over growth equities. In 2022, the Russell 1000 Value Index fell by 7.5%, compared with a much harsh decline of 29.1% for the Russell 1000 Growth Index.

Analysts expect the value investing trend to continue this year as well. Sarah Ketterer, a chief executive of Causeway Capital Management, spoke to The Street about the investment outlook in 2023. She asserted that stable interest rates would bode well for value stocks. She also mentioned that while investing in value stocks, investors should also consider the return on capital like dividends and buybacks.

Dividend stocks also reported strong performance in 2022 as investors preferred income-generating stocks. Companies in the S&P 500 distributed over $561 billion in dividends last year, up from $511.2 billion in 2021, as reported by Wall Street Journal. Among these companies, The Coca-Cola Company (NYSE:KO), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG) remained popular among investors as these companies have shown solid dividend growth over the years.

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Our Methodology:

The stocks mentioned below have raised their dividends for 25 years or more. These companies have P/E ratios of less than 20. We also considered Wall Street analysts’ ratings in examining these stocks along with hedge fund sentiment as of Q3 2022. The stocks are ranked in an ascending order of their P/E ratios as of January 12.

11 Undervalued Dividend Aristocrats To Buy Now

11. Nucor Corporation (NYSE:NUE)

P/E Ratio as of January 12: 4.69

Nucor Corporation (NYSE:NUE) is an American company that specializes in the production of steel. In the third quarter of 2022, the company reported revenue of $10.5 billion, which showed a 2% growth from the same period last year. Its cash and cash equivalents at the end of October amounted to over $3 billion, up from $2.3 billion ten months ago. As of January 12, Nucor Corporation (NYSE:NUE) has a price-to-earnings ratio of 4.69 and is among the undervalued dividend aristocrats to buy now.

On December 14, Nucor Corporation (NYSE:NUE) declared a 2% hike in its quarterly dividend to $0.51 per share. This was the company’s 50th consecutive year of dividend growth. The stock’s dividend yield came in at 1.32% on January 12. In addition to popular dividend stocks like The Coca-Cola Company (NYSE:KO), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG), Nucor Corporation (NYSE:NUE) is also gaining traction among investors.

In January, BofA reinstated its coverage on Nucor Corporation (NYSE:NUE) with a Buy rating and a $172 price target. The firm presented a positive outlook on the US steel sector.

Nucor Corporation (NYSE:NUE) was a popular stock among hedge funds in the third quarter of 2022, as 41 funds tracked by Insider Monkey reported owning stakes in the company, compared with 32 in the previous quarter. The collective value of these stakes is roughly $403 million. With over 1.2 million shares, Citadel Investment Group was the company’s leading stakeholder in Q3.

10. Aflac Incorporated (NYSE:AFL)

P/E Ratio as of January 12: 9.24

Aflac Incorporated (NYSE:AFL) is a Georgia-based insurance company that provides related services to its consumers in the country. In November, Piper Sandler raised its price target on the stock to $80 with an Overweight rating on the shares, highlighting the company’s capital optimization. The firm also appreciated the company’s quarterly earnings.

In the third quarter of 2022, Aflac Incorporated (NYSE:AFL) reported revenue of $4.8 billion, which beat estimates by $240 million. The company’s total investments at the end of September amounted to over $114 billion. With a price-to-earnings ratio of 9.24, the company is among the undervalued dividend aristocrats among us.

On November 8, Aflac Incorporated (NYSE:AFL) declared a quarterly dividend of $0.42 per share, increasing it by 5% from its previous dividend. The company has been raising its dividends consistently for the past 40 years. As of January 12, the stock has a dividend yield of 2.33%.

As of the close of Q3 2022, 34 hedge funds in Insider Monkey’s database reported owning stakes in Aflac Incorporated (NYSE:AFL), up from 32 in the previous quarter. These stakes are collectively valued at nearly $380 million.

9. National Fuel Gas Company (NYSE:NFG)

P/E Ratio as of January 12: 9.93

National Fuel Gas Company (NYSE:NFG) is an American diversified energy company that specializes in the distribution of energy resources. The company has been doling out consistent dividend payments for the past 120 years and has raised its payouts for 52 years straight. It currently offers $0.475 per share in quarterly dividends and has a dividend yield of 3.07%, as of January 12.

At the end of September, National Fuel Gas Company (NYSE:NFG) reported over $46 million in cash and investments, up from $31.5 million during the same period last year. The company’s operating cash flow for the period came in at $812.5 million, compared with $791.5 million in the prior-year period. It is one of the undervalued dividend aristocrats on our list with a P/E ratio of 9.93.

At the end of September 2022, 29 hedge funds in Insider Monkey’s database reported owning stakes in National Fuel Gas Company (NYSE:NFG), up from 23 in the preceding quarter. The collective value of these stakes is roughly $219 million. Among these hedge funds, GAMCO Investors was the company’s leading stakeholder in Q3.

8. Chevron Corporation (NYSE:CVX)

P/E Ratio as of January 12: 9.97

Chevron Corporation (NYSE:CVX) is a California-based multinational energy company that has operations in over 180 countries. As of January 12, the company is trading at a P/E multiple of 9x and is among the undervalued aristocrats on our list.

Chevron Corporation (NYSE:CVX) currently pays a quarterly dividend of $1.42 per share for a dividend yield of 3.19%. The company’s dividend growth streak stands at 35 years. In the third quarter, its operating cash flow came in at $15.3 billion and its free cash amounted to $12.3 billion. During the quarter, it paid $2.7 billion in dividends to shareholders, which represented a 6% growth from the same period last year.

The number of hedge funds tracked by Insider Monkey owning stakes in Chevron Corporation (NYSE:CVX) grew to 66 in Q3 2022, from 59 in the previous quarter. These stakes have a total value of over $27 billion. Berkshire Hathaway was the company’s leading stakeholder in Q3.

Diamond Hill Capital mentioned Chevron Corporation (NYSE:CVX) in its Q1 2022 investor letter. Here is what the firm had to say:

“Other top contributors in Q1 included multinational energy company Chevron Corp. (NYSE:CVX). The company benefited from increased energy demand as COVID-related economic restrictions eased in tandem with concerns regarding supply interruptions related to Russia’s invasion of Ukraine.”

7. Expeditors International of Washington, Inc. (NASDAQ:EXPD)

P/E Ratio as of January 12: 11.37

Expeditors International of Washington, Inc. (NASDAQ:EXPD) is an American logistics company, based in Washington. The company currently pays a dividend of $0.67 per share twice a year and has a dividend yield of 1.23%, as of January 12. It maintains a 28-year streak of consistent dividend growth, falling into the category of dividend aristocrats.

In the third quarter of 2022, Expeditors International of Washington, Inc. (NASDAQ:EXPD) reported a 1% year-over-year growth in its revenue at $4.36 billion. The company’s operating cash flow for the quarter came in at $670.3 million, up from $177.3 million during the same period last year. It is among the undervalued dividend aristocrats with a price-to-earnings ratio of 11.37, as of January 12.

In January, Cowen maintained a Market Perform rating on Expeditors International of Washington, Inc. (NASDAQ:EXPD).

At the end of Q3 2022, 31 hedge funds tracked by Insider Monkey owned stakes in Expeditors International of Washington, Inc. (NASDAQ:EXPD), up from 28 in the previous quarter. The collective value of these stakes is over $260.8 million. With 2.6 million shares, First Eagle Investment Management was the company’s leading stakeholder in Q3.

6. Franklin Resources, Inc. (NYSE:BEN)

P/E Ratio as of January 12: 11.65

Franklin Resources, Inc. (NYSE:BEN) is a California-based multinational holding company that provides investment services to its consumers. In November, Deutsche Bank maintained a Hold rating on the stock, presenting a neutral stance on asset managers, brokers, and exchanges due to market fluctuations.

In December, Franklin Resources, Inc. (NYSE:BEN) reported a 1.6% decline in its assets under management to $1.39 trillion due to a stock market sell-off. However, the company remained committed to shareholder return, paying over $773 million to stakeholders in dividends and share repurchases during FY21.

On December 13, Franklin Resources, Inc. (NYSE:BEN) declared a 3.4% hike in its quarterly dividend to $0.30 per share. This marked the company’s 43rd consecutive year of dividend growth. As of January 12, the stock has a dividend yield of 4.03%. It can be added to dividend portfolios alongside some of the best dividend stocks like The Coca-Cola Company (NYSE:KO), Johnson & Johnson (NYSE:JNJ), and The Procter & Gamble Company (NYSE:PG).

At the end of September, 25 hedge funds in Insider Monkey’s database owned stakes in Franklin Resources, Inc. (NYSE:BEN), up from 24 in the previous quarter. These stakes have a collective value of nearly $126 million.

5. Archer-Daniels-Midland Company (NYSE:ADM)

P/E Ratio as of January 12: 12.38

Archer-Daniels-Midland Company (NYSE:ADM) is a Chicago-based food processing company that produces a wide range of food products. In Q3 2022, the company reported revenue of $24.6 billion, which showed a 21.3% growth from the same period last year. At the end of September, it had over $1 billion in cash and cash equivalents. The company is among the undervalued dividend aristocrats with a P/E ratio of 12.38.

In January, Stifel raised its price target on Archer-Daniels-Midland Company (NYSE:ADM) to $116 with a Buy rating on the shares ahead of the company’s Q4 earnings.

Archer-Daniels-Midland Company (NYSE:ADM) currently pays a quarterly dividend of $0.40 per share and has a dividend yield of 1.83%, as of January 12. The company has been raising its dividends consistently for the past 49 years.

As of the close of Q3 2022, 37 hedge funds tracked by Insider Monkey reported owning stakes in Archer-Daniels-Midland Company (NYSE:ADM), compared with 42 in the previous quarter. These stakes are valued collectively at nearly $600 million.

Diamond Hill Capital mentioned Archer-Daniels-Midland Company (NYSE:ADM) in its Q1 2022 investor letter. Here is what the firm has to say:

“ADM is a leading agricultural processor that also operates a global nutrition business focused on the development of ingredients and flavors for food and beverages, supplements and more. The company’s recent operating results have benefited (unfortunately) from the war in Ukraine as grain prices and agricultural markets globally experienced strong price increases. ADM is positioned well to benefit from the volatility due to its stable North American agricultural base.”

4. T. Rowe Price Group, Inc. (NASDAQ:TROW)

P/E Ratio as of January 12: 13.79

T. Rowe Price Group, Inc. (NASDAQ:TROW) is a Maryland-based investment management company that offers different related services. The company currently pays a quarterly dividend of $1.20 per share for a dividend yield of 4.02%, as of January 12. It maintains a 36-year track record of consistent dividend growth.

T. Rowe Price Group, Inc. (NASDAQ:TROW), one of the undervalued dividend aristocrats on the list, is trading at a PE multiple of 13x. At the end of Q3 2022, the company had $2.8 billion available in cash and generated $1.6 billion in revenues. It paid $832.4 million in dividends to shareholders during the first nine months of 2022.

In December, Wells Fargo initiated its coverage of T. Rowe Price Group, Inc. (NASDAQ:TROW) with an Equal Weight rating and a $125 price target, presenting a strong stance on the company’s performance.

At the end of Q3 2022, 30 hedge funds tracked by Insider Monkey owned stakes in T. Rowe Price Group, Inc. (NASDAQ:TROW), up from 27 in the previous quarter. The collective value of these stakes is nearly $320 million. Among these hedge funds, Balyasny Asset Management was the company’s leading stakeholder in Q3.

3. Chubb Limited (NYSE:CB)

P/E Ratio as of January 12: 15.65

Chubb Limited (NYSE:CB) is one of America’s largest commercial insurers that has operations in over 54 countries and territories. In January, Piper Sandler raised its price target on the stock to $230 with an Overweight rating on the shares. The firm presented a positive stance on the insurance sector this year.

Chubb Limited (NYSE:CB) has been raising its dividends consistently for the past 29 years, which makes it popular among investors. It currently pays a quarterly dividend of $0.83 per share and has a dividend yield of 1.47%, as recorded on January 12. The stock has a price-to-earnings ratio of 15.65, as of January 12.

As of the close of Q3 2022, 41 hedge funds tracked by Insider Monkey owned stakes in Chubb Limited (NYSE:CB), up from 35 in the previous quarter. These stakes are worth nearly $2 billion collectively. Among these hedge funds, Viking Global was the company’s leading stakeholder in Q3.

Aristotle Capital Management mentioned Chubb Limited (NYSE:CB) in its Q1 2022 investor letter. Here is what the firm has to say:

“Our investment in Chubb began in the fourth quarter of 2015, shortly after ACE Limited announced it would acquire the Chubb Corporation, creating the largest global property and casualty insurance company by underwriting income. During our nearly seven-year holding period, the company’s combination progressed leading to the realization of main catalysts we had identified. These included cost savings, broadened product offerings and an expanded customer base, as well as enhanced distribution capabilities and improved pricing due to scale. In addition, Chubb successfully grew its profitable high-net-worth personal lines. While we still consider Chubb to be a high-quality business, few catalysts remain after what was, in our opinion, a remarkable run of successful business execution. As such, we decided to step aside in favor of what we believe to be a more optimal investment in Blackstone.”

2. Caterpillar Inc. (NYSE:CAT)

P/E Ratio as of January 12: 18.3

Caterpillar Inc. (NYSE:CAT) is a Texas-based construction equipment company that also manufactures mining products. The company has been raising its dividends consistently for the past 28 years and currently offers a quarterly dividend of $1.20 per share. The stock’s dividend yield on January 12 came in at 1.88%.

In the third quarter of 2022, Caterpillar Inc. (NYSE:CAT) returned over $2 billion to shareholders in dividends and share repurchases. As of January 12, the stock is trading at a PE multiple of 18x and is among the undervalued dividend aristocrats on our list.

Stifel raised its price target on Caterpillar Inc. (NYSE:CAT) to $271 in December with a Buy rating on the shares, expecting the price/cost environment to improve in the upcoming quarters.

At the end of Q3 2022, 43 hedge funds tracked by Insider Monkey owned stakes in Caterpillar Inc. (NYSE:CAT), compared with 45 in the previous quarter. These stakes are valued at over $2.8 billion collectively.

Diamond Hill Capital mentioned Caterpillar Inc. (NYSE:CAT) in its Q1 2022 investor letter. Here is what the firm had to say:

“We also initiated a position in Caterpillar (NYSE:CAT), one of the world’s leading manufacturers of construction and mining equipment. It’s a company we know well, as we have owned it in our large cap portfolio for quite some time. Recent share price weakness provided an opportunity for us to add it to our large cap concentrated portfolio at an attractive discount to our estimate of intrinsic value. We believe Caterpillar stands to benefit from increased capital investment supported by a healthier/recovering end market environment, particularly in construction and mining.”

1. A. O. Smith Corporation (NYSE:AOS)

P/E Ratio as of January 12: 19.93

A. O. Smith Corporation (NYSE:AOS) manufactures water heaters and boilers for commercial and residential customers in the US. In December, Citigroup lifted its price target on the stock to $61 with a Neutral rating on the shares. The firm mentioned that the company is expected to show better results due to improving supply chains and improving price versus cost trends.

A. O. Smith Corporation (NYSE:AOS) has a price-to-earnings ratio of 19.93, as of January 12. In 2022, the company extended its dividend growth streak to 29 years. It currently pays a quarterly dividend of $0.30 per share for a dividend yield of 1.95%, as recorded on January 12.

At the end of Q3 2022, 29 hedge funds tracked by Insider Monkey reported owning stakes in A. O. Smith Corporation (NYSE:AOS), worth $370.8 million. Impax Asset Management owned the largest stake in the company in Q3, valued at $194.3 million.

LRT Capital Management mentioned A. O. Smith Corporation (NYSE:AOS) in its Q2 2022 investor letter. Here is what the firm has to say:

“A.O. Smith is the largest US manufacturer of residential and commercial water heaters, boilers and water treatment products. The company generates close to $3 billion in annual sales. The majority of the company’s business (73%) is done in North America, with the balance coming from China and India. Approximately 80% of demand is replacing existing heaters and 20% is tied to new construction. The company continues to benefit from a shift towards higher efficiency, but more expensive, tankless heaters.

A.O. Smith generates returns on invested capital in the high teens. The company uses its earnings to consistently grow its dividends and share repurchases. Over the past three years the company’s performance has been hurt by its exposure to China as its business there suffered due to the US-China trade war and poor execution. We believe the China business is back on track and the all-important US business is doing better than ever as housing demand heats up in the US. The company beat earnings estimates over the past several quarters and is currently enjoying very good performance as the hot U.S housing market continues to be strong.¹⁹ A.O. Smith also recently increased its share repurchase authorization.”

You can also take a look at 13 Best Undervalued Stocks To Buy and 10 Undervalued Insurance Stocks To Buy

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Disclosure. None. 11 Undervalued Dividend Aristocrats To Buy Now is originally published on Insider Monkey.